What's Your Brands Digital IQ?

Is your digital strategy working? Kate Barnett of L2 talks to Happi about the companies that are making the most of their online presence, and what other firms can do to improve their presence in today's connected marketplace.

By Christine Esposito, Associate Editor

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Every beauty company executive recognizes the need for an online strategy—but executing that strategy is another story. Some brands are better than others—and L2, billed as a think tank for digital innovation, has released details of those on top and those who are lagging behind in the digital revolution. Its recently released Digital IQ Index: Beauty & Skincare measures and ranks the digital competence of 40 brands across four dimensions: effectiveness of a brand’s site, digital marketing, social media and mobile.

According to L2’s founder, Scott Calloway, clinical associate professor of marketing at NYU Stern, digital competence is inextricably linked to shareholder value in the beauty industry. In the report, Calloway said L2’s aim was to “provide a robust tool to diagnose digital strengths and weaknesses and help brands achieve greater return on incremental investment.”

The firm’s methodology ranked the 40 companies based on the following: 40% for the brand’s website, 30% for digital marketing, 20% for social media and 10% for mobile (covering compatibility and marketing on smart phones and other mobile devices.)

According to L2, genius and gifted firms have made significant investments in search, email marketing and contextual retargeting and are building strong social media communities to drive online sales. Specifically, L2 described Clinique and Estée Lauder as “digitally deft” because they have introduced user reviews, online chat and social-sharing functionality to drive traffic and attract consumers.

So, what brands floundered at the bottom of the list? Trish McEvoy, Nivea, Almay, Shiseido and Pond’s were ranked as “feeble” and pulled up the rear among the 40 brands examined by L2 (the complete ranking is available at L2’s website, www.l2thinktank.com).

Happi spoke with Kate Barnett, lead researcher on the study, about L2’s findings and how beauty and skin care companies can raise their “digital IQ.”

HAPPI: We see that big companies such as Lauder and L'Oréal are doing well when it comes to their digital IQ, based on L2's ranking. But did any company surprise youin terms of their ranking as "genius/gifted" or “feeble/challenged”? What surprised you and why?

Barnett: The trends across the beauty industry have been the most interesting to me. For instance, beauty brands have been slow to adopt web 2.0 tools, though they’re proven to improve conversion rates.It’s surprising to me that more brands haven’t followed Clinique’s lead, integrating user reviews, ratings and live chat. Those companies that achieved a "genius" ranking have global, integrated digital and social media strategies; they’re on top because they’ve made the investment to be there. Just having a Facebook page or Twitter account isn’t enough.

HAPPI:Can you pinpoint one or two examples of successful endeavors in enhancing digital presence made by a beauty brand? Can you point to a failure?

Barnett: Lancôme’sacquisitionof Michelle Phan as an asset in February was a brilliant move. Seven of the top ten most viewed “how-to” channels on YouTube belong to self-appointed beauty gurus, and Michelle Phan leads the pack with over a million subscribers to her channel. Michelle creates one lightly branded video for Lancôme each month. The clips sit on Michelle’s YouTube channel, earning 1.5 to 2.5 million views a piece. Moreover, the cross-platform strategy has led to a 263% increase in Lancôme Facebook fans since March.

Another interesting example of the power of a brand's online community is the cancellation of M.A.C's line with Rodarte this past fall. M.A.C—one of two beauty brands to earn a Genius ranking—enjoys a robust online following. But their community spoke out against the brand's newest line after ghastly photos from the campaign emerged, promoting products named for factory towns in Mexico with a history of violence against women. M.A.C’s crisis-control initially focused on dedicating a portion of the line’s profits to the women of Juarez, Mexico; eventually the company cancelled the line altogether. It’s incredible to think that blogger dissent sparked the conversations that ultimately dissolved the line.

HAPPI: Can you talk about email. Isn't this a love-hate area for consumers? How does a company make sure it is connecting without flooding a consumer’s inbox?

Barnett: Email remains one of the most effective marketing tools for beauty brands, generating the greatest ROI. Over-populating inboxes is less of a concern than missing the chance to connect. Only half of the brands in the study sent a welcome email to consumers requesting information, and 20% didn't send a single email in the three months of data collection. Email marketing is a huge and surprisingly common missed opportunity; beauty brands are neglecting those precious consumers actively seeking them out.

HAPPI: Facebook underachievers seem to be luxury brands. Why is this? Is their consumer not in this social media space? Can/should they lure them there?

Barnett: Facebook underachievers were identified by comparing a brand's Facebook "likes" to the number of global monthly organic searches for its brand name on Google, as a proxy for brand equity online. Underachievers often have great brand equity online, but have yet to capitalize on Facebook. The greatest overacheivers in Beauty are also luxury brands, MAC and Chanel. In general the luxury consumer is well-represented on the platform (fan favorite, Burberry, boasts over 3.5 million Facebook fans), and in our most recent survey of affluent Gen Ys, we found that wealthier consumers were both more brand aware and more tech savvy. So, the target market is well-represented on the platform, but the onus is on the brands to give their consumers a more compelling Facebook experience.

HAPPI: Mobile is destined to become bigger and more important in all CPG categories, beauty included. How can beauty companies/retailers best leverage this technology—and who is working it best now?

Barnett: I love Sephora's shoppable app. Smartphone-in-hand you can scan a product's barcode to see rankings and comments as well as how-to videos. You know which products you've purchased in the past, and what's new since your last store visit.More than simply giving access to the website via mobile, "Sephora to Go" integrates the online and in-store experiences, changing and enhancing both. There's not one right answer for how beauty brands should leverage mobile technology, but by 2014 more people will be accessing the web from their mobile devices than from computers.There's no question that brands should be in the game.

HAPPI: Why should companies let users review their products online on their sites? What are the benefits? Are there any pitfalls in allowing this type of feedback, knowing that negative comments can pop up?

Barnett: The bottom line is that user reviews increase conversion rates and improve search engine visibility.92% of internet users say they read online reviews, and 46% say the presence of reviews positively influences purchase intent. Brands are concerned about negative reviews, but the online community is self-policing. One negative review will often be countered by a slew of product devotees, passionately defending the products they love.

HAPPI: In the study, L2 mentions that the iPad platform us been underexploited by brands/beauty firms. Who do you think has the most potential to rise to the top in this area?

Barnett: Lancôme is the only brand with an app developed, and has continued to show innovative leadership around social media. No one's using the iPad platform in a compelling way just yet, but I'd continue to watch those brands that are willing to test and take risks.

HAPPI: What's your best advice to companies that are start-up and niche brands regarding using social media?

Barnett: As the internet matures people are focusing on fewer sites, and Facebook's share ofthe internet continues to grow. Websites remain important, particularly for e-commerce, but brands will increasingly follow their customers, making their content available on Facebook.With more than 550 million active users, Facebook dominates thesocial media landscape. Furthermore, the platform is about to do to magazines what Google did to newspapers, providing easier access to a vast array of content. As such, Facebook is an ideal place to target niche markets and create authentic relationships with consumers. Instead of placing media buys, brands have the opportunity to own those direct relationships.

HAPPI: Lastly, should every brand have a presence on every popular social media/web-based space? For example, does a company really need YouTube? Must they Tweet?

Barnett: Every company has different needs, and simply being present on a platform isn't enough. The importance of a thoughtful digital strategy will only increase. A disproportional percentage of marketing budgets in the beauty industry are earmarked for print media; last year’s beauty brands devoted about 45% of their ad spend to magazines, though consumers spent only 6% of their time with a brand through that medium. Meanwhile, a quarter of time spent interacting with brands is done so online.Brands are catching on, and it’s the “end of the beginning” of a dramatic shift in ad spending fromtraditional formats to digital, but beauty is slow to the draw.